What Management Said
Read the full Q3 2025 transcript ↗Todd's deep experience in healthcare finance, capital allocation, and operational transformation will be instrumental as we continue executing our growth strategy and enhancing shareholder value. Turning to our third quarter results, we reported revenue of $851.6 million, representing a 4.4% increase over the third quarter of last year. Adjusted EBITDA was $173 million, compared with $194.3 million in the prior year period. As previously disclosed, these results reflect softer-than-expected volumes in our Medicaid book of business, particularly in our acute care segment.
Same facility volume growth was 1.3% in the quarter, which was consistent with the preliminary commentary we shared at the Jefferies Healthcare Services Conference in late September. These items are causing us to reduce our Adjusted EBITDA guidance for 2025 to $650 million-$660 million from our previously issued guidance of $675 million-$700 million. First, let me expand on how we are focused on capturing the inherent growth opportunity that currently exists in the business. These additions are expected to contribute meaningfully to both same facility volume and EBITDA as they ramp over the next several years and reach their full performance potential.
Our execution across these initiatives drove over 3% same facility admissions growth in Q3 compared to last year, which is an acceleration from trends in the first and second quarters. As a backdrop, the demand environment for behavioral health services remains structurally strong. We continue to see rising acuity across patient populations, greater awareness and destigmatization of mental health, and a persistent supply-demand imbalance, particularly in underserved geographies. That said, we're taking a more measured approach to capital deployment in the near term.
- Third quarter 2025 revenue of $851.6 million grew 4.4% over the prior-year quarter, with same-facility revenue up 3.7% driven by a 2.3% increase in revenue per patient day and 1.3% growth in patient days.
- Same-facility admissions grew over 3% year-over-year, an acceleration from first- and second-quarter trends, driven by targeted referral-source action plans in acute care.
- The company added 83 beds to existing facilities in Q3 (274 year-to-date through expansions) and commenced operations at three previously announced joint venture hospitals with Geisinger, Ascension Seton, and Fairview Health Services.
- Three CTCs were added in Q3, extending reach to 177 CTCs across 33 states, with 14 added in 2025 amid continued strong demand for medication-assisted treatment.
- Costs related to managing the government investigations fell to $39 million, down 28% from the Q2 high watermark, with further moderation expected.
- Q3 CapEx of $135.8 million was more than $20 million favorable to plan, and the company expects to generate positive adjusted free cash flow for full-year 2026, ahead of the prior run-rate timeline.
- Adjusted EBITDA of $173 million fell from $194.3 million a year earlier and came in approximately $5 million below internal expectations, driven primarily by lower volumes and an increase in bad debts and denials.
- Same-facility volume growth of 1.3% was about 100 basis points below internal expectations, reflecting softer-than-expected Medicaid volumes, particularly in acute care.
- The company cut full-year 2025 Adjusted EBITDA guidance to $650-$660 million from $675-$700 million amid volume softness, rate pressure, higher employee healthcare benefit costs, and increased professional and general liability expense.
- Q3 startup losses of $13.3 million rose from $7.3 million in Q3 2024, and several development projects were paused for failing to project acceptable returns.
- DSO spiked in the quarter on slower payments from some federal plans plus rising denials and bad debt.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Full-year revenue | FY2025 | $3.28B-$3.3B (lowered) |
| Full-year Adjusted EBITDA | FY2025 | $650M-$660M (lowered) |
| Full-year Adjusted EPS | FY2025 | $2.35-$2.45 (lowered) |
| Full-year same-facility volume growth | FY2025 | low end of 2%-3% (lowered to low end) |
| Full-year revenue per patient day growth | FY2025 | lower end of low single-digit (lowered to low end) |
| Full-year net Medicaid supplemental payments | FY2025 | high end of $30M-$40M (raised to high end) |
| Q4 PLGL incremental charge | Q4 2025 | $4M-$6M (newly provided) |
| Full-year startup losses | FY2025 | $60M-$65M (unchanged) |
| Full-year CapEx | FY2025 | $610M-$630M (revised) |
| Beds to be added | FY2025 | 945-1,076 total (provided) |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Total revenue | +4.4% to $851.6M | same-facility revenue up 3.7%, partly offset by softer-than-expected Medicaid volumes |
| Adjusted EBITDA | down to $173M from $194.3M | lower volumes and increased bad debts and denials, with supplemental payments a partial offset |
| Same-facility volume growth | +1.3% | softer Medicaid volumes, about 100 basis points below internal expectations |
| Same-facility admissions | +over 3% | targeted referral-source action plans in acute care, an acceleration from Q1 and Q2 |
| Startup losses | $13.3M vs $7.3M prior year | large number of newly opened facilities |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Medicaid volume / payer friction | weaker Medicaid acute volumes emerging in Q2 | more frequent utilization review and length-of-stay scrutiny from Medicaid managed care, concentrated in Medicaid-heavy markets | Worsening |
| Bad debts and denials | emerging pressure | increased denials, driven by reimbursement for fewer days than care provided, during or post-discharge | Worsening |
| Capital discipline | revised 2025 CapEx of $610M-$630M | 2026 CapEx at least $300M lower; several development projects paused | Tightening |
| Startup losses | $60M-$65M for 2025 | expected to decrease modestly in 2026, material step-down in 2027 | Peaking then improving |
| Government investigation legal costs | Q2 high watermark | $39M in Q3, down 28%, expected to keep moderating | Improving |
| Leadership | interim CFO Tim Sides; COO Nasser Khan | Todd Young joined as permanent CFO; Nasser Khan stepping down as COO | Transition |
Q&A Summary
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